The challenges of running a business

Starting a business can be risky, and not all businesses succeed. New businesses often fail during the early years.

We recommend that you seriously consider the following causes for business failure. Understanding what can go wrong, and how these challenges would affect you and your family, can help you to decide if you are ready to start a business.

Market potential

Before you start your business, thoroughly research your market. Many businesses fail because the market for their products or services is too small to support them. It isn't enough to know that a market exists for a product or service. You must also investigate the size of the market, your competitors' strengths and weaknesses, your points of difference, and the sustainability of demand for your product or service.

Capital

Many good business initiatives fail due to poor funding, so carefully consider your capital requirements when planning your business. You will need enough capital to sustain your business until it begins to break even or consistently return a profit. You could also use financial benchmarking data to find out what funding might be required to start your business.

Risk analysis

List all your business and personal risks - some risks can be expressed in dollars while others are impossible to value. At a business level, consider the most important risks that could affect your business, including:

financial

technological

intellectual property

product sustainability (relevance over time)

legal

safety

staff retention

machinery breakdown.

At a personal level, you may be risking your home, other important family assets your family wellbeing and your present career.

Growth

Plan growth carefully to give your business a much greater chance of success. Some businesses expand too quickly, putting pressure on their financial and management structures and damaging the quality of their products or services.

Location

You may struggle to attract customers if your business is difficult to find, hard to access, and surrounded by competitors. Retail businesses in particular require a prominent and easily accessible location.